# EUR-Lex - 52013PC0390 - EN

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# 52013PC0390

**Proposal for a COUNCIL DECISION on the existence of an excessive deficit in Malta /* COM/2013/0390 final - 2013/0179 (NLE) */**

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2013/0179 (NLE)

Proposal for a

COUNCIL DECISION

on the existence of an excessive deficit
in Malta

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the
Treaty on the Functioning of the European Union, and in particular Article
126(6) thereof,

Having regard to the proposal
from the Commission,

Having regard to the
observations made by Malta,

Whereas:

(1)       According to Article 126
of the Treaty on the Functioning of the European Union (TFEU) Member States
shall avoid excessive government deficits.

(2)       The Stability and Growth
Pact is based on the objective of sound government finances as a means of
strengthening the conditions for price stability and for strong sustainable
growth conducive to employment creation.

(3)       The excessive deficit
procedure (EDP) under Article 126 TFEU, as clarified by Council Regulation (EC)
No 1467/97 on speeding up and clarifying the implementation of the excessive
deficit procedure[1]
(which is part of the Stability and Growth Pact), provides for a decision on
the existence of an excessive deficit. The Protocol on the excessive deficit
procedure annexed to the Treaty sets out further provisions relating to the
implementation of the EDP. Council Regulation (EC) No 479/2009[2] lays down detailed rules and
definitions for the application of the provisions
of the said Protocol.

(4)       According to Article
126(5) TFEU, if the Commission considers that an excessive deficit in a Member State exists or may occur, it shall address an opinion to the Member State concerned and the Council accordingly. Having taken into account its report in accordance
with Article 126(3) TFEU and having regard to the opinion of the Economic and
Financial Committee in accordance with Article 126(4) TFEU, the Commission
concluded that an excessive deficit exists in Malta. The Commission therefore
addressed such an opinion to Malta and informed the Council on 29 May 2013[3].

(5)       Article 126(6) TFEU states
that the Council should consider any observations which the Member State concerned may wish to make before deciding, after an overall assessment, whether
an excessive deficit exists. In the case of Malta, this overall assessment
leads to the following conclusions.

(6)       According to data notified
by the Maltese authorities in April 2013, the general government deficit in Malta reached 3.3% of GDP in 2012, thus exceeding the 3%-of-GDP reference value. The
Commission report under Article 126(3) TFEU considers that the deficit was
close to the 3%-of-GDP reference value, but the excess over the reference value
could not be qualified as exceptional within the meaning of the Treaty and the
Stability and Growth Pact. In particular, it does not result from a severe
economic downturn in the sense of the Treaty and the Stability and Growth Pact.
In 2010 and 2011, real GDP growth was, on average, above 2% annually, higher
than potential growth. Preliminary GDP data published by the national
statistics office on 11 March 2013 show that economic growth slowed down in
2012, but remained positive at 0.8%. The positive output gap in 2011 is
estimated to have turned slightly negative in 2012. The planned excess over the
reference value cannot be considered temporary. According to the Commission
2013 spring forecast, the deficit would increase to 3.7% of GDP in 2013 and
reach 3.6% of GDP in 2014. The deficit criterion in the Treaty is not
fulfilled.

(7)       Notified data also show
that the general government gross debt stood at 72.1% of GDP in 2012, above the
60%-of-GDP reference value. The Commission 2013 spring forecast projects the
debt ratio to increase to 74.9% of GDP in 2014. Following the abrogation of the
EDP in December 2012, Malta benefitted from a three-year transition period to
comply with the debt reduction benchmark, starting in 2012. In 2012, Malta did not make sufficient progress towards compliance with the debt reduction
benchmark, as its structural deficit worsened whereas it was required to
improve it. It can therefore be concluded that the debt criterion of the Treaty
is not fulfilled.

(8)       (8)        In
line with the provisions in the Treaty and the Stability and Growth Pact, the
Commission also analysed in its report “relevant factors”. As specified in the
Stability and Growth Pact, for countries with a debt ratio above 60% of GDP
(like Malta), these factors can only be taken into account in the steps leading
to the decision on the existence of an excessive deficit, when assessing
compliance on the basis of the deficit criterion, if the general government
deficit remains close to the reference value and its excess over the reference
value is temporary, which is not the case for Malta[4].
At the same time, such factors have been taken into account when assessing the
breach of the debt criterion, but they do not seem to question the decision on
the existence of an excessive deficit either. In particular, progress towards
compliance with the debt reduction benchmark has been assessed in light of the
debt- and deficit-increasing impact of financial assistance to Euro Area Member
States. For Malta, the cumulative impact of Greek loan facility, EFSF
disbursements, capital contributions to the ESM, and operations under Greek
programme over the period 2011-2014 would be 3.9% of GDP on debt, and 0.1% of
GDP on deficit. When taking into account the impact of these operations, the
structural effort for 2012 required for Malta to comply with the debt criterion
would have been lower, but still well above the structural effort actually
implemented by Malta in 2012.

HAS ADOPTED THIS DECISION:

Article 1

From an overall
assessment it follows that an excessive deficit exists in Malta.

Article 2

This Decision is
addressed to the Republic of Malta.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 209, 2.8.1997, p. 6.

[2]               OJ L 145, 10.6.2009, p. 1-9.

[3]               All EDP-related documents for
  Malta can be found on the following website:        
http://ec.europa.eu/economy_finance/sgp/deficit/countries/malta_en.htm.

[4]               Article 2.4 of Council
Regulation (EC) No 1467/97.